Hoover Institution

RESEARCH BRIEFING 23-01

Renewing Indigenous Economies

Federal Barriers Limit Native

American Benefits from Water
Right Settlements
Western tribes use only a fraction of water allocated
in settlement agreements because restrictions on the
use of reservation trust land and other constraints
deprive them of benefiting from water valued at up
to $1.8 billion annually.

Based on Leslie Sanchez, Bryan Leonard, and Eric Edwards, “Paper

Water, Wet Water, and the Recognition of Indigenous Property Rights,”
Journal of the Association of Environmental and Resource Economics
(forthcoming).
The Research Problem

A wave of recent court rulings and legal settlements is recognizing Indigenous property rights to natural resources ig-
nored during colonization. Better-defined and secure property rights should help remedy prior takings by enabling Indig-
enous right holders to fully capture the value of their natural resources. More broadly, clearer ownership should promote
long-term investments in resource use and reduce environmental degradation from overuse.

Whether tribes benefit from these settlements, however, depends on a myriad of other barriers, restrictions, and reg-
ulatory constraints that undermine their sovereign control of reservation resources. Empirical analysis of the long-term
effects of formalizing Indigenous property rights is key to understanding if and how resource use and the associated
benefits change when formal rights are restored.

What We Examined

The empirical analysis examines the long-term effects of

a large-scale restoration of Native American water rights
through settlement agreements in the western United
States. Water rights in the West were established for white
settlers in the 1800s under the prior appropriation doctrine’s
“first in time, first in right” rules, without regard for preex-
isting uses or water needs of Native Americans living on
reservations. A 1908 Supreme Court ruling (Winters v. United
States), however, affirmed that reservation treaties implicitly
entitled tribes to water rights sufficient to fulfill the needs of
the reservation based on when it was established. Because
the ruling did not quantify tribal water rights or specify water
sources, those implicit rights were unenforced, leaving water
for appropriation for off-reservation use.

As the value of water has increased with population growth

and more diversions, tribes have sought legal quantifica-
tion of their rights, typically through negotiated settlement
agreements with neighboring water users, states, and the
federal government. Since the first settlement in 1978,
forty-six of 226 reservations in eleven western states have
quantified their water rights through settlements. To un-
derstand how the legal settlements affected water use and
reservation development, we use satellite data from 1974
to 2012 to compare changes in agricultural and developed
land use before and after settlement across approximately Figure 1. The map depicts the sample of reservations.
250,000 parcels on two groups of reservations: a treatment Treated parcels are on reservations that completed a water
group that settled their water rights by 2012, and a control settlement by 2012. Control parcels are on reservations
group that had started the adjudication process but whose that initiated an adjudication but had not completed a
rights had not yet been adjudicated by 2012 (figure 1). We settlement by 2012.
then use estimated changes in land use among treated par-
cels, relative to control parcels, to estimate how settlements changed reservation water use.

The analysis accounts for two important impediments. First, putting settlement water to use typically requires capital
investment such as irrigation equipment and large-scale water infrastructure to deliver water. Accessing capital can take
decades and delay the use of water on reservations lacking preexisting irrigation projects. Second, significant amounts
of reservation land are not owned in fee-simple tenure but are instead held in trust by the federal government. Trust land
cannot easily be collateralized for irrigation infrastructure loans, is subject to federal oversight, and is difficult to convert
to higher-valued uses. Because trusteeship limits how lands can be passed to heirs, millions of acres of trust land have
been fractionated into many ownership interests, some of which cannot be identified by the Bureau of Indian Affairs
(BIA). We test for the effects of land tenure restrictions on postsettlement land and water use to better understand how
they affect the benefits to Native Americans of water settlements.

RESEARCH BRIEFING 23-01 2

What We Found

Gains from water settlements were limited relative to the magnitude of tribal water entitlements. Land used for agri-
culture increased by 7.5 to 8.7 percent, or a 4,500-to-5,250-acre increase per reservation following a settlement, while
developed land use did not measurably change. As of 2012—which is the most recent year of available land use data—
tribes that had secured water settlements were using an average of 24 to 44 percent of their total water entitlements on
reservation and leased on average 3.5 percent to off-reservation users. The three hundred-year-old Nonintercourse Act
bars tribes from leasing their water rights without an act of Congress, which some tribes have obtained. Tribes that have
authorization still face high transaction costs associated with water marketing. Absent the ability to lease or use the re-
maining 53 to 72 percent of their water rights, tribes forgo rights valued between $938 and $1.8 billion annually, and the
water is used for free by the next off-reservation owner in the priority order.

Western water is increasingly scarce and valuable, so why aren’t tribes able to capture the full value of their rights? Trust
land restrictions are one reason. As a result, agricultural water use expands almost exclusively on fee-simple land, where-
as developed land use does not change measurably on any land tenure class. The analysis suggests that, if all parcels
were free of trust constraints, average settlement water use in 2012 would grow from 24 to 44 percent to between 37
and 61 percent of the tribes’ total entitlements. Thus, tenure constraints contribute to some, but not all, of the forgone
settlement benefits. We also find that the postsettlement gains in reservation agriculture are concentrated on the seven
reservations that already had irrigation projects in place. Such projects were constructed by the BIA beginning in the late
1800s and are currently poorly maintained. Given the steep barriers tribes face in accessing credit for tribally built infra-
structure and delays in settlement funding for new infrastructure, tribes’ settlement water access and on-reservation use
appear limited to existing infrastructure.

Lessons for Policy

• Winning formal legal rights to natural resources is a necessary but insufficient condition for Indigenous

people to benefit from their natural resources.

• Removing institutional barriers and restrictions on tribal resource use and infrastructure development

will reduce structural differences that inhibit tribes from benefiting from their resources in the same way

as off-reservation resource users.

• Reducing barriers to off-reservation water marketing may enable tribes to generate and reinvest water-

leasing revenue into on-reservation activities that meet their own water-use goals and priorities.

3 HOOVER INSTITUTION PROJECT ON RENEWING INDIGENOUS ECONOMIES

Author Affiliations

Leslie Sanchez is a postdoctoral researcher at the US Forest Service Rocky Mountain Research Station. Bryan Leonard is
an associate professor at Arizona State University and a 2019–2020 Campbell Visiting Fellow at the Hoover Institution.
Eric Edwards is an assistant professor at the University of California, Davis.

Further Questions

How do Winters settlements affect water availability and use by off-reservation water right holders? How does federal
settlement funding affect the outcomes of settlements? Which reservations stand to benefit the most from the ability to
lease their water rights for off-reservation uses?

Further Reading

Ge, Muyang, Eric C. Edwards, and Sherzod B. Akhundjanov. “Irrigation Investment on an American Indian Reservation.”
American Journal of Agricultural Economics 102, no. 4 (2020): 1083–104.

Leonard, Bryan, Dominic P. Parker, and Terry L. Anderson. “Land Quality, Land Rights, and Indigenous Poverty.” Journal
of Development Economics 143 (March 2020): 102435.

Sanchez, Leslie, Eric C. Edwards, and Bryan Leonard. “The Economics of Indigenous Water Claim Settlements in the
American West.” Environmental Research Letters 15, no. 9 (August 2020): 094027.

RESEARCH BRIEFING 23-01 4

HOOVER INSTITUTION PROJECT ON
RENEWING INDIGENOUS ECONOMIES

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